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General Cable Corporation (BGC)
Q2 2010 Earnings Call Transcript
August 3, 2010 8:30 am ET
Len Texter – Manager, IR
Greg Kenny – President and CEO
Brian Robinson – EVP, CFO and Treasurer
Stuart Bush – RBC Capital Markets
Jeff Beach – Stifel Nicolaus
Jack Stemic [ph] – BB&T Capital Markets
Brent Thielman – D.A. Davidson
Michael Coleman – Sterne Agee
Shawn Harrison – Longbow Research
Richard Wesolowski – Sidoti & Company
Anthony Kure – Keybanc
Gary Farber – C.L. King
David Wachowski [ph] – Jefferies & Company
Previous Statements by BGC
» General Cable Corporation Q4 2009 Earnings Call Transcript
» General Cable Corporation Q3 2009 Earnings Call Transcript
» General Cable Corporation Q2 2009 Earnings Call Transcript
Good morning, everyone, and welcome to General Cable's second quarter 2010 earnings conference call. I'm Len Texter, Manager, Investor Relations at General Cable. Joining me this morning are Greg Kenny, our President and Chief Executive Officer; Brian Robinson, our Chief Financial Officer; and Greg Lampert, our President and Chief Executive Officer of General Cable North America.
Many of you have already seen a copy of our press release from last night. For those of you who have not, it is available on First Call and on our website at generalcable.com. I want to call your attention to our Safe Harbor provisions for forward-looking statements that can be found at the end of our press release. The Safe Harbor provision identifies risk factors that may cause actual results to differ materially from the content of our forward-looking statements. Our current reports, 10-K and other periodic filings on file with the SEC provide further detail about the risk factors related to our business.
During this call, we may refer to adjusted operating income and adjusted EBITDA, which is defined as earnings before interest, taxes, depreciation, amortization, plant rationalizations and other items. These non-GAAP company-defined measures are being provided because management believes they are useful in analyzing the operating performance and cash flow before the impact of various charges. A reconciliation of adjusted operating income and EBITDA to GAAP net income is available on the Investor Relations section of our website at generalcable.com.
The format for today's call will first be some discussion by Greg Kenny about the current business environment. Secondly, Brian Robinson will provide some financial detail about the second quarter. And finally, Greg will provide some comments on the company's third quarter 2010 outlook and business trends, followed by a question-and-answer period.
We would like to remind everyone that effective January 1, 2010, the company changed its method of valuing all of its inventories that historically used the last-in/first-out method to the average cost method. The company applied this change in accounting principle, retrospectively, to all prior comparative periods discussed here today.
With that, I will now turn the call over to Greg Kenny.
Thank you, Len, and good morning. I'm pleased to report that we delivered a solid second quarter marked by a return of seasonal demand patterns in the rest of the world and North America, volume growth year-over-year in our early cycle businesses, and the benefit of cost reduction efforts made throughout 2009. Our earnings for the second quarter were in line with our expectations despite lower than expected volumes.
Volume as measured in metal pounds sold was lower due principally to weaker than expected demand across a wide range of the company’s products in May and June, as well as the delay of certain transmission projects in the rest of the world. For the second quarter of 2010, we reported revenues of $1.2 billion and adjusted earnings per share of $0.54. These results were reduced by severance related charges of $11.1 million, as we substantially completed our negotiations with the works councils of the various operations in Spain to permanently reduce manufacturing personnel.
There were also adjustments to the research and development credits of $3.1 million in France. While the reemergence of seasonal demand patterns is encouraging, many of our businesses are still moving sideways when seasonality as we moved and we therefore remain cautious about the second half of this year as there remains a great deal of uncertainty surrounding the nature and pace of the economic recovery.
Brian will take you through the details of the financials in a bit. I thought I would spend some time talking about how I currently see our business environment. Many of the positive trends we identified in the first quarter have continued into the second quarter, particularly as it relates to the stabilizing of demand for certain products in the United States, Brazil, Southeast Asia, South Africa, and Central America.
We are encouraged by the ongoing investment and commitment to infrastructure development throughout our rest of the world segment. In addition to the massive transmission projects that are under contract in Brazil, of which we have already booked over $150 million of orders to be delivered over the next two or three years, there have been billions of dollars of investments approved in additional power distribution and power generation projects, including hydroelectric.
In Central America, Chile, Peru, Zambia and South Africa, the need for infrastructure related projects continues to gain momentum as the respect of the companies grow, in the case of Chile, rebuild. In Thailand, our high and extra high voltage business continues to perform well despite recent political unrest. And in the Philippines, a peaceful election and change in leadership coupled with expected export earnings growth are encouraging.
In the United States, there is gradual improvement or stability occurring in many sectors of the economy, with the notable exception perhaps of residential and significant sectors of non-residential construction where data continues to be mixed and inconclusive. The decelerated pace of many leading economic indicators within the last two months has generated great deal of uncertainty as to the rate and sustainability of the recovery. Overall, demand for many of our products remains at historically variable levels with our North American factories operating at the 55% to 70% utilization levels.